C O N F I D E N T I A L SECTION 01 OF 03 KINSHASA 001976

SIPDIS

AF/EPS FOR KWALZ, EB/ESC FOR SSPECT

E.O. 12958: DECL: 10/22/2014
TAGS: EMIN ECON PGOV PREL CG
SUBJECT: KIMBERLEY PROCESS VISIT TO DRC PROVIDES
CONSTRUCTIVE CRITICISM

REF: KINSHASA 1747

Classified By: Econoff Peter Newman for reasons 1.4 b/d


1. (SBU) Summary. At the request of the DRC government, a
Kimberley Process review team visited the DRC in October.
Although the GDRC has made some progress, it is not in full
compliance with Kimberley Process regulations. There are
still serious holes in the DRC's Kimberley Process system,
and an estimated 40 percent of production is smuggled
undocumented. Some government agencies involved in the
Kimberley Process are functioning well, but the political
will to maintain them and improve other offices is lacking.
The review team was very open with the international
community. It signaled that it will likely give balanced
criticism of GDRC compliance, and that it recognizes the
DRC's importance to the international diamond trade. End
Summary.

TEAM COMPOSITION


2. (SBU) The Kimberley Process (KP) review team came to the
DRC at the request of the Congolese goverment from Oct 11 to

15. This is a positive and proactive step showing DRC
willingness to achieve compliance with international norms.
The review team consisted of Team Director Ambassador David
Viveash (Canada), Mark Van Bockstael (Antwerp High Diamond
Council), Kim Eling (European Commission), Jacqueline Lenka
(South Africa Diamond Board), Abdoul Wahab Diakhaby (Guinean
National Diamond and Precious Materials Bureau), and Emily
Bild (Global Witness). The team granted ample briefing time
to the international community, holding a COM dinner at the
beginning of the visit and a diplomatic community outbrief at
the end. Econoff, along with one British and one Canadian
diplomat, travelled with the team to the interior of the DRC.
(Note: Both DCM and econoff were told the USG was slated to
lead this review visit. Due to the apparent unavailability of
a USG participant, Canada agreed to head the delegation. DCM
and Econoff were both asked about the lack of USG
participation. End note.)

THE POSITIVES


3. (SBU) Organizing and educating artisanal miners will be
key to tracking the source of diamonds and to providing
miners with opportunities for economic development. The
Service d'Assistance et d'Encadrement du Small Scale Mining
(Saesscam) could be instrumental in this role, according to
the KP team. They were impressed by Saesscam's ability to
organize 23 cooperatives (50 percent of which are owned by
expats) of small scale miners, usually working with dredges
on rivers. Saesscam also is attempting to provide some
business and safety training to the small scale and artisanal
miners in the Kasais. At present, Saesscam does not have
sufficient funds to fully deploy. As the number of
cooperatives grow, however, so will Saesscam's receipts.
Saesscam charges a fee for its services, which, beyond
organizing the cooperatives, include monitoring of operations
and safeguarding and transfer of diamonds.


4. (C) Cadastre Minier (Cami) is the body that processes and
registers mining and exploration titles. Its effectiveness is
necessary for orderly development of the mining sector as it
avoids chaotic licensing. The KP team cited Cami as a
positive example of a well-functioning government
institution. Van Bockstael forecasted, however, that within
one year Cami will not function anymore because it works too
well. (Comment: Cami has already been the subject of
political attacks from the Minister of Mines. The Minister
sacked the head of Cami, Ambroise Mbaka, during Summer 2004.
Mbaka claimed the Minister did this because he would not give
preferential treatment to a friend of the Minister in
processing an application. Cami was also efficiently
processing exploration and mining title applications to the
point that the applications were piling up on the Minister's
desk. If, after a period of 30 days, the Minister does not
sign the titles, they automatically are accepted. There is
speculation that the Minister did not like the restriction -
as it limited his ability to "treat" each case - and thus, in
August, prohibited Cami from accepting any new applications.
End comment.)

QUESTIONS AND CONCERNS


5. (C) The KP team was uncertain if the system of
acknowledgement of receipt of certificates is working well,
or if the GDRC is following up on unconfirmed Kimberley
Process Certificates (KPCs). The GDRC only gave half answers
to the Kimberley Process team regarding statistical
discrepancies in KPC reporting, according to Van Bockstael.
Several certificates have arrived in Europe and Israel that
have not been recorded in the DRC. Four countries from
2003-2004 have reported exporting rough diamonds to the DRC,
for which the DRC has no records.


6. (C) Illegal leakages of diamonds cause 40 percent of DRC
production (by value) not to be captured within the KP
system. This discrepancy cannot be reconciled with the
numbers from Congo-Brazzaville, which was accused of
smuggling USD 350 million per year of diamonds from the DRC.
(Note. Brazzaville was removed from the Kimberley Process in
June 2004. KP participant countries are no longer allowed to
trade in diamonds with Congo-Brazzaville. End Note.)
According to Van Bockstael, the majority of diamonds (by
value) traded in Brazzaville were from Angola and were
smuggled through the DRC. The Congolese diamonds traded in
Brazzaville were largely from Mbuji Mayi and did not reach
the 40 percent (by value) figure. The sharp increase in
exports from the DRC in July was essentially a shock while
the diamond dealers moved to beat the learning curve and find
new export channels. Eling noted that the KP cannot blame the
DRC for having porous borders. The question should be focused
on whether smuggling is part of the system. Team members were
dismayed that while the GDRC was very concerned about
leakages of its own diamonds, it had no interest at all in
dealing with diamonds from neighboring countries which leak
into the DRC.


7. (C) Political wrangling around the control of the diamond
trade inhibits the development of a strong tracking and
evaluation system in compliance with KP regulations. The
competition between the Minister of Mines, Eugene Diomi
Ndongala, and the CEEC was evident at both the Kinshasa and
provincial levels. Each tried to upstage the other in
presentations, to the point of even hosting competing dinners
for the team the same evening. This institutional tension is
complicated by the diffuse structure of institutional roles
in the diamond sector. Both Eling and Van Bockstael referred
to the Aug/Sept 2003 gaffe by Minister of Mines Diomi where
he accused Miba of fraudulently exporting USD 10 million of
diamonds to the UK. This was because the Vice-Minister of
Mines, in place of the Minister, signed the KPC for the
shipment. The KP team has specifically asked the GDRC to
clarify how many signatures are the minimum and who are the
authorized signatories for the KPCs. Furthermore, some
responsibilities are replicated, such as the presence of the
Mining Administration in comptoirs at the same time as a CEEC
representative (reftel).

TRAVEL TO THE INTERIOR


8. (C) Econoff accompanied the team to Mbuji Mayi and
Tshikapa on Oct 12-13. The meetings in Mbuji Mayi generally

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revolved around Miniere de Bakwanga (Miba - the diamond
parastatal). Team members were generally not impressed by
Miba's facilities or its growth plans. Security was spotty in
the sorting room and equipment was substandard and
antiquated. Not one member of the senior management team of
Miba was present during the visit. Besides meeting with Miba
and regional CEEC and Ministry of Mines authorities, the KP
team visited several comptoirs in both Mbuji Mayi and
Tshikapa. The GDRC made a strong effort to round up miners

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and negotiants with government-required ID cards to
demonstrate that diamonds are being tracked through an ID
system. There were two comptoirs in Mbuji Mayi that were
accepting diamonds from sellers (be they miners or
negotiants) without identification. (Comment: What was
troubling in those instances was that the CEEC and Mining
Administration representatives were present and were not even
enforcing the minimum standard of ID cards. They let the
transactions take place regardless. End comment.)

KIMBERLEY PROCESS AS AN ASSISTANCE BODY


9. (SBU) One of the topics raised at the outbrief for the
international community was the use of the Kimberley Process
as an assistance body. Ambassador Viveash stated that the KP
does not have the funding necessary to provide technical
assistance on its own but it encourages Western donor nations
to direct funding to projects to improve compliance with
Kimberley Process regulations. Mark Van Bockstael noted that
the KP is beginning to look at the idea of technical
assistance and will soon hold seminars on KP implementation
and "Diamonds for Development." He also stated that the KP
could become a clearing house for ideas to channel to donors.
OTHER OBSERVATIONS


10. (C) Van Bockstael was concerned that the DRC continues to
have a production quota for the comptoirs of USD 30 million
per month (total for all comptoirs). This encourages cheating
because when DRC production drops slightly the comptoirs must
source their diamonds from Angola to meet the quota. Removing
the production quota would allow greater purchasing and
cashflow flexibility to the comptoirs while opening the
market to other firms that may not be able to strongly
contribute to the quota.


11. (SBU) Van Bockstael noted that Mbuji Mayi is rising in
importance in the international diamond trade because. the
industrial quality stones of the type found in Mbuji Mayi are
only found in one other mine in the world, the Argyle Mine in
Australia. The Argyle mine is extremely mature and will
likely be exhausted in the next 5-7 years. The Indian diamond
polishing industry, which relies on these industrial quality
diamonds, has become a multi-billion dollar business and will
force a shift in purchasing from Australia to Antwerp or
direct from the DRC to gain access to the stones it desires.
Production in Mbuji Mayi will have to increase to meet the
demand from India. Investment should begin to grow regardless
of DRC internal political conditions.


12. (C) One of the new smuggling methods mentioned by Van
Bockstael was the use of KPCs as transit documents. For
example, a diamond shipment and accompanying DRC certificate
could be sent to Switzerland. Once in Switzerland, the owner
of the parcel could transform the diamonds to a banking
transaction (rather than a mineral export) and move the
diamonds to a non-participant country. (Note: Van Bockstael,
Eling and Viveash all noted that Switzerland is close to
being removed from the KP rolls if it does not stop this sort
of activity. End note.)

COMMENTS


13. (C) Comment: The KP review team came to make sure that
the Kimberley Process continues in the DRC, not to chastise
GDRC performance. The DRC is not in full compliance with
Kimberley Process regulations. The DRC's rising importance in
the international diamond trade, however, makes it impossible
and unwise to remove the country from the Kimberley Process.
The KP team recognized the difficult internal political
conditions that exist, and are of the opinion that the DRC
system is, and will be for a long time, a work in progress.
Recommendations will likely focus on clarifying internal
divisions of labor and on increasing traceability from mine
to comptoir. Unfortunately, the structures of the KP system
and the institutions which work well (CEEC, Saesscam and
Cami) are all under attack by competing political interests.
Though the GDRC appears very engaged and willing to listen to
the recommendations given by the KP, follow-through, as
determined by momentary political necessities, will likely be
spotty. End Comment.
MEECE